BEA terms budget 'pro-people'

Economists praised the proposed budget for fiscal 2010-11, saying it is a 'pro-people budget' and has provided a guideline to growth.

Bangladesh Economic Association (BEA), the apex forum of economists, made the observation at its office.

“It's a positive budget, having growth momentum,” BEA President Dr Abul Barkat told the press at the briefing.

The finance minister has balanced the requirements of the economy, keeping in mind the necessities, including energy, infrastructure, safety nets, price control and providing fallow land for the landless, said Barkat.

“Also, there are downside risks that need to be addressed in the final budget."

According to the BEA, the risks are: a high cost of doing business, implementation of the development programmes, a lack of inter-ministerial coordination, the law and order situation, corruption and implementation of social safety net schemes.

BEA's observation came three days after the present Awami League-led government placed its second budget in parliament on June 10.

Dr Towfique Ahmad Chowdhury, general secretary of BEA, read out the 16-page 'reactions and recommendations on the budget'. Other office bearers of the association were present.

Earlier, the BEA submitted 64 recommendations at a pre-budget meeting with the standing committee on the finance ministry. Also, the association presented 73 recommendations at a pre-budget press conference.

“Many of our recommendations were adopted in the budget,” Barkat said.

The finance minister projected a 6.7 percent economic growth rate for the coming year. According to estimates in the budget, the investment to GDP ratio would reach 32 percent from the present rate of 24.2 percent and inflation will be contained within 6.5 percent next year.

Analysts said the growth will depend largely on how the government addresses the energy and infrastructure constraints.

“I hope there will be some radical improvements in the coming year in power generation,” said the BEA president.

The government projected that it would generate 1,000-1,500 MW of electricity in 2010-11.

“But the cost of the electricity will increase significantly, as it will be rental,” said Barkat. He said a unit of electricity generated by furnace oil will cost Tk 7.21, while it will be Tk 12.74 in the case of generation by diesel.

BEA believes the proposed Tk 132,170 crore budget matches the trends and inflation rate. This budget outlay is nearly 20 percent higher than the revised one.

On higher revenue expenditure, the BEA said it is natural because the new pay scale for the government employees will be implemented fully in the coming year. Higher payments for interest and subsidies to farm and power sectors will push the non-development costs up, it said.

On deficit financing, the association said it will not fuel inflation if the money were used for the productive sectors.

It suggested the government supervise and monitor the annual development programmes (ADP) strictly and regularly to see better implementation. It proposed formation of a taskforce to monitor the ADP of 10 large ministries that account for nearly 77 percent of the total spending.

The association also hailed the government for its decision to distribute fallow land to the landless. But it said a land reform commission should be formed in this regard.

Budget pro-growth, but may fuel inflation: FBCCI

The country's apex trade body lauded the budget as "pro-growth and broadly business-friendly" but said the proposed new taxes for the upcoming fiscal year would put extra burden on consumers and spike inflation.

In a budget reaction, the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) said the budget would generate more revenue than the government has projected for the 2010-2011 fiscal year.

"But it will add additional tax burden on the people as the budget has increased taxes in many areas. This will also spur inflation," said FBCCI president Annisul Huq.

Huq said the proposed expansion of value added tax would hike prices of goods and commodities across a broad spectrum, boosting inflation at a time when it is least wanted.

"The government should continue the existing rate of value added taxes," he said, adding the proposed VAT hike "won't generate more revenue but would only lead to increased harassment for shop owners".

The FBCCI judged the government's budget as "pro-growth and pro-business", but listed qualitative implementation of annual development programme as the "biggest challenge".

"In the outgoing fiscal year the government could spend 70 per cent of its development allocation. But the question remains: how much of it was quality spending?" Huq said.

"The government should look at the timely allocation of the budget and the rate of return," he said, adding attainment of the government's growth target would largely depend on how well the budgetary allocations are to be spent.

The Federation said although the size of the budget - Tk 1.32 trillion - is nearly 20 per cent bigger than the outgoing one, it is "not ambitious".

Huq said the budget has projected a record 6.7 per cent economic growth in the upcoming fiscal year and the government has also attached importance to the areas which would determine the expansion.

He said by and large the budget is "business-friendly", but the trade community has some reservations in a few areas, which need to be properly addressed to create a win-win situation for the government as well as industry.

He said for making Bangladesh a middle-income nation policy support on economic zone and industrial development should be made a top priority in the budget before it is approved.

Huq said small and medium enterprises might face troubles as the new budget discourages commercial import of spare parts of capital machinery.

"As a result, they may have to shoulder extra cost," he said adding that the imports of agriculture machinery might also face same adversity.

The FBCCI chief said several statutory regulatory orders (SROs) issued with the finance bill could stand in the way of the business.

"Their (SROs) number is small in this budget. But these orders could jack up cost of doing business in the country and aggravate people's suffering," Huq said.

The FBCCI said Bangladesh's corporate taxes are the highest in South Asia, which naturally discourages companies to pay taxes.

He said the proposed hike in advance income tax from three per cent to five per cent will affect import of all goods and products. "Eventually, the consumers will have to bear the additional burden."

The 10 per cent tax imposed on institutions that trade stocks might also adversely affect the securities market, the apex trade body said.

The federation also demanded withdrawal of five per cent tax slapped on income of sponsor shareholders or directors of companies engaged in trading in the Dhaka and Chittagong stock exchanges and three per cent tax on the shares of companies sold at a premium value.

It said the proposed tax on premium value of shares violates the country's income tax laws, as "the premium value is a part of capital of a company not revenue".

It said the hike in advance trade VAT on imports and manufacturing stage will affect the prices of products.

"The budget has illogically increased VAT at manufacturing stage to 20 per cent from 10 per cent. The government has so far failed to recoup taxes at 1.5 per cent. So the proposed three per cent tax will not bring any good."

The 15 per cent VAT on rents for commercial use and three per cent tax at manufacturing stage will also adversely affect prices of goods and products.

Government sets target to mobilise Tk 207.77 billion foreign assistance

The government of Bangladesh has set a target to mobilise Tk 207.77 billion foreign assistance, 15.71 per cent of the total Tk 1321.70 billion national budget, from foreign donors in the next fiscal to finance the budget expenditures.

The expected overseas loans and grants is Tk 25.43 billion higher than the revised budget and Tk 24.32 billion more than the original budget of the outgoing FY2010.

In the original budget of the outgoing fiscal 2009-10, the government set a target of Tk 182.34 billion as foreign assistance (including grant and loans) which was 16.12 per cent of the total Tk 1138.19 billion budget outlay.

Out of Tk 207.77 billion foreign aid expected in the next fiscal, Tk 159.68 billion will be borrowed from different bilateral and multilateral donors while Tk48.09 billion will come as grant.

Finance minister AMA Muhith unveiled Tk 1321.70 billion expansionary national budget in the Jatiya Sangsad for the next financial year 2010-11.

Out of the projected Tk 207.77 billion foreign assistance, Tk 188 billion will be spent for implementing Annual Development Programme (ADP) and the remaining Tk 19.77 billion for other development works.

The government will mobilise Tk 152.90 billion as project aid, Tk 2.49 billion as food aid, Tk 35.00 billion as special support/credit for development, and Tk 1.50 billion as structural adjustment.

As most of the foreign resources will be spent for implementing the development schemes under the ADP, the finance minister underlined the need for improving the project implementation capacity of the project implementing agencies in the government.

AMA Muhith said the foreign assistance will also help to reduce the deficit in the proposed national budget for fiscal 2010-11.

The minister projected 5.0 per cent budget deficit in terms of GDP size. To offset the resources gap Tk 156.43 billion, 2.0 per cent of GDP, will come from external sources and Tk 236.80 billion, 3.0 per cent of GDP, from domestic sources.

Donors to cut aid strings

Development partners will reduce the number of conditionalities under a joint cooperation strategy (JCS) and the government will formulate a result-based development framework for effective use of foreign assistance.

After a wide range of consultations at various forums in the last five years, the JCS agreement was signed yesterday for the 2010-15 tenure. Six action plans have been set for fiscal 2010-2011.

The deal will also harmonise the activities of the development partners.

The development partners in the JCS said: "We further commit to reducing the number of conditionalities and basing the related benchmarks on the government's plans and strategies."

They also promised to increase multi-year predictability of aid flows and reduce the overall number of parallel project implementation units.

They said they would reduce transaction costs resulting from uncoordinated development activities.

The government and 18 development partners signed the first-ever JCS agreement at the National Economic Council auditorium in Dhaka.

Economic Relations Division Secretary Musharraf Hossain Bhuiyan signed the deal on behalf of the government and Country Representative of UK Department for International Development (DFID) Chris Austin signed on behalf of the donors.

At the signing ceremony, Finance Minister AMA Muhith said every year around 600 missions from the development partners visit Bangladesh. "On an average one mission comes every day. Every donor has its own rules and formalities."

The finance minister said the JCS agreement will harmonise the donors' activities, saving time and costs. Some donors have already said they would not go for separate country assistance strategies and use a single strategy.

The ERD in a statement said the JCS has a detailed annual action plan. It includes joint activities to strengthen the government's aid management capacity, improved public financial management, and joint monitoring and evaluation activities.

Other issues of mutual interest are the development partners' alignment to the government policies, priorities, systems and procedures, the statement added.

ERD officials said there are mainly three components in the JCS  –  joint commitment of the government and development partners, a six-point action plan, and a detailed development partner mapping as to which donor would work in which area.

The government will approve the sixth five-year plan and aid management policy and strategy by December this year. The project approval and implementation processes will witness reforms by early next year, while new programme-based approach for the health and education sectors will be drawn by June 2011.

The national sector development results framework would be drafted by October 2010 and it would be finalised by December.

The ERD officials said, for every sector there will be separate indexes prepared for taking stock of what work is being done and what is its outcome. On the basis of the indexes, the development partners would monitor the progress and outcome of the works.

The officials also said the development partners will carry out field visits.

The meeting of Bangladesh Development Forum will be held in March 2011. The progress of JCS will be reviewed every year and it will be submitted in the plenary of the Local Consultative Group.

The signatories among the development partners were the Asian Development Bank, Australia, Canada, Denmark, European Union, Germany, the Islamic Development Bank, Japan, Republic of Korea, the Netherlands, Norway, Spain, Sweden, Switzerland, the UK, the United Nations, the US and the World Bank.

Planning Minister AK Khandker and DFID Country Representative Chris Austin spoke at the signing ceremony.

Bangladesh receives 1638.16 million dollar  in loans, grants in July-April

Bangladesh received 1638.159 million dollar in foreign loans and grants from the development partners and lenders for the first 10 months (July-April) of the current fiscal year.

Of the amount, 1364.077 million dollar came as loan while 274.082 million dollar as grants, said a source at the Economic Relations Division.

He said that of the amount, Asian Development Bank provided 969.84 million dollar, World Bank 283.65 million dollar, Japan 68.08 million dollar and the UN agencies provided 34.26 million dollar.

During the period, Bangladesh made repayment of 551.125 million dollar as principal and 158.766 million dollar as interest.

The development partners and lenders earlier made a commitment of providing 1868.903 million dollar to Bangladesh till March of the current fiscal year.

Growth hinges on energy: CPD

The government should work on the promises it made in the outgoing fiscal year to address critical issues like energy and infrastructure, said a leading think tank recently.

The Centre for Policy Dialogue (CPD) said the government has to start implementing a lot  –  from public-private partnership projects to power generation and regional economic cooperation  –  according to its promises.

“The first year (the outgoing fiscal year) was a preparatory year. The government has to go for execution now,” CPD Executive Director Prof Mustafizur Rahman told journalists during the launch of an assessment report on macroeconomic performance for fiscal 2009-10.

The government has set a plan to generate 9,500MW electricity by 2015, for which it should focus more on coal extraction, the CPD said.

Rahman said industrial term loan and import of capital machinery are showing a positive trend, but growth will not get a momentum unless the acute energy and infrastructure crises go.

A higher economic growth of 6.5 percent is quite possible provided that the country has adequate energy and infrastructure facilities, he said.

“One percentage point of GDP growth requires 1.8 percent growth in electricity.”

The CPD researcher also reiterated their stand against any provision of whitening black money in the coming budget.

IMF projects 6 percent growth for FY11

IMF recently predicted around 6 percent growth of Bangladesh economy for the next fiscal year, but suggested that the removal of infrastructure bottlenecks and improvement in business environment can help log a higher growth.

The international lending agency, however, alerted that any unevenness in the global recovery and power disruptions might hurt the growth performance.

It pointed to the fact that a window of opportunity to attract more investment waits for Bangladesh as Asia, which is leading the global recovery, will attract capital inflows for the next few years.

“The question is how Bangladesh takes the opportunity. You have to start running because all other countries are moving fast,” said IMF Resident Representative Eteri Kvintradze.

Kvintradze unveiled its projections on Bangladesh at a press briefing at Bangladesh Bank, organised to share the IMF outlook on Asia and the Pacific region, which, for the first time, escorts the global economic recovery, spurred by export growth and resilient domestic demand.

The IMF said Asia will grow by about 7 percent and such a brighter growth prospects compared to the rest of the world is likely to attract more capital in the region.

“Resolving infrastructure bottlenecks and improving business environment could refocus investment spotlight in Bangladesh, help utilise comparative advantages of low labour costs, boost its productivity and put the country in faster growth gear,” the IMF official said.

“Accelerating regional integration will also be a significant contributing factor to strengthen growth performance,” added Kvintradze, referring to the linkages in areas of trade, transportation and infrastructure and private sectors.

The representative said Asian low-income countries (LICs) as a group are expected to grow around 6 percent in the near term. “Our projections for Bangladesh are more or less in line with the LICs,” she said.

The IMF expects a rise in Bangladesh's exports next financial year on higher demand in advanced economies. It also said the recent volatility in the financial markets in Europe might not hurt the demand for Bangladesh's main exportable item readymade garments in the EU zone.

Kvintradze also observed that inflationary pressure might ease slightly, expecting that there would be no sharp rise in the global commodity prices.

A stable macroeconomic policy stance will also help curb inflation, she added.

She further suggested that the FY 2010-11 budget should aim at raising tax revenue and accelerating ADP implementation pace to boost medium-term growth potential for faster poverty reduction.

Per capita income crosses 700 dollar

The per capita income crossed the 700 dollar mark in the current fiscal year, mainly because of a healthy GDP growth.

The people of lower strata have got a share of the rise in the income as small-scale industries have shown a rapid growth and employed the poor segment.

The per capita income has reached 750 dollar this fiscal year from 676 dollar last year.

For Bangladesh to graduate to a mid-income country, its per capita income should be 975 dollar now.

World Bank senior economist Zahid Hussain said Bangladesh can quickly reach the mid-income group of countries only if its GDP grows at a faster rate of around 7.5 percent to 8 percent. The GDP (gross domestic product) growth rate is 5.5 percent now.

Hussain said the growth is healthy in the existing economic scenario.

Bangladesh Bureau of Statistics (BBS) early this week finalised the provisional account of GDP for the current fiscal year and the actual GDP calculations for the last year.

"If we can't make a rapid progress, we won't be able to reach the level of per capita income required for becoming a mid-income country," Hussain said.

"From the growth pattern it seems that the low-income people have benefited from the rise in the per capita income."

In the manufacturing sector, small-scale industries, which are more labour intensive, have shown the most rapid growth.

The WB economist also said the country fetched a huge amount of remittance this year, which gave a rise to non-farm activities such as in small teashops, biscuit factories and small toy shops in the rural areas.

This has helped the lower strata people get a share of the increased per capita income, said Hussain.He said the growth has almost doubled this fiscal year in public administration and education sectors. The income of the government staff, workers and teachers increased as the pay scale was implemented.

The government repeatedly projected the GDP growth rate to be 6 percent but the BBS provisional account shows that the growth was 5.54 percent this fiscal year.

The BBS in the final calculation of last fiscal year's GDP growth showed a slide to 5.74 percent, which was 5.9 percent in earlier estimate.

The services sector showed a good growth this year, but the overall GDP growth was lower because of a fall in the agriculture and industries sectors.

The growth rate in the agriculture sector dropped almost by half due to the declining growth in crop. The growth rate in crop sector was 2.20 percent this fiscal year, down from 4.02 percent last year.

BBS officials said the main contributor to the crop sector is rice. In the last fiscal year crop sector saw a bumper production of rice at around three crore tonnes. Although Aus crop was hampered this year, the harvest is expected to be around three crore tonnes. As the production remained the same, the crop sector did not rise.

In the manufacturing sector, the growth rate fell by 1.40 percentage points compared to the last fiscal year, due to a poor performance by the export sector.

The inflow of a big amount of remittance and the implementation of pay scale in the public sector contributed to the growth in the services sector.

Hope for an industrial hub : Unido DG says Bangladesh on track

Bangladesh can become an industrial hub of Asia as the country has a proven capacity in textile, food and pharmaceutical industries, says the chief of a United Nations body.

Kandeh K Yumkella, director general of the United Nations Industrial Development Organisation (Unido), also says the country needs to adopt green technologies to make its growing industrial sector sustainable.

“You have a proven capacity to be a manufacturing hub that can make products not only for domestic use but also for trading internationally,” says Yu-mkella who came to Bangladesh recently on a three-day state visit.

He says other emerging economies in Asia are looking for a regional industrial hub, which Bangladesh has the potential to become, and Unido wants to provide support in making it.

“I am also here to see how to create some opportunities for South-South-cooperation with India and other emerging economies in the region. They are also looking for a manufacturing hub.”

Yumkella says Bangladesh has the right plan of action to become a regional industrial hub, and the development partners in cooperation with the UN agencies are ready to provide all-out support to the country in achieving the target.

Praising the government's ambitious 'Vision 2021', the Unido DG says Bangladesh has the right policy in place to give incentive to the foreign investors and bolster their confidence.

“Unido wants to support the vision that requires rapid industrialisation to create jobs and wealth.”

Referring to the Unido plan to make readymade garment industry sustainable, Yumkella says the UN body will help establish a National Cleaner Production Centre (NCPC) in Bangladesh so the industries of the country become energy efficient and environment friendly.

The NCPC will conduct regular inspection at factories to ensure efficient use of energy, water and other natural resources.

The centre will also help establish effluent treatment plants to manage industrial waste and dyeing, the Unido chief says.

He says the NCPC will be a homegrown institution with supports from the development partners who will make available the resources of the best industrial practices.

Unido is already supporting the textile and garment sector in Bangladesh. Yumkella says it has several projects in the country to help improve designs for garments and develop entrepreneurship.

“Now what we want to do is to complement our programme in this sector with advisory services on sustainability."

The Unido will help the factories cope with energy crisis, optimise water use and reduce effluent, he says.

About introducing renewable energy projects, Yumkella says the Unido will provide solar panels to the community health care centres.

“We have offered help to the Bangladesh government so it can introduce solar energy to the community health care centres to make it popular,” he says.

Yumkella says the UN is encouraging the private sector across the world to come and invest in Bangladesh.

“We have begun encouraging private sector to invest in Bangladesh so local companies can assemble the renewable energy products.”

He says the Unido will also promote Bangladesh as a good manufacturing hub.

Yumkella, who is on a 15-day visit to Asia, met the prime minister, health minister, industries minister and other dignitaries.

Bangladesh needs stable policies for sustainable industrialisation: UNIDO DG

Bangladesh needs stable public policies with a risk-free political environment to attract large volume foreign investment and drive sustainable industrialisation, Director general of United Nations Industrial Development Organisation Kandeh K Yumkella said recently.

‘Stable policy is very important for sustainable industrialisation because it takes an average of three to five years to complete a major investment process….companies are very concerned about having stable public policy,’ Kandeh said while talking to journalists at the VIP Lounge of the Shah Jalal International Airport.

Replying to a question the UNIDO head said lack of proper infrastructure is the key barrier to industrialisation, which is common in other developing countries.

‘The investors need to be convinced that you (Bangladesh) have solid infrastructure on the ground. And secondly Bangladesh needs confidence that investment assets will be protected….I think Bangladesh is way ahead in establishing such a level of confidence,’ Kandeh, who came here on three-visit said.

He emphasised good public policies that provide incentive and regulations to ensure that green technologies are adopted. ‘Bangladesh needs to adopt green technologies to make its growing industrial sector sustainable.’

Expressing satisfaction over the implementation of the UNIDO-supported programmes in Bangladesh, the UN body chief said it is working together with Bangladesh to set up a National Cleaner Production Centre which will look at the whole concept of ‘greening industry.’

‘The NCPC will be based on four major pillars –  reduce the use of natural resources, to be energy efficient, to optimise water use, and reducing effluents, which will all be part of our ‘greening industry’,’ he said, adding that they will also help Bangladesh in managing clinical waste.

He said they have identified some additional areas of cooperation including medical waste management in discussion with the Bangladesh government.

‘We’re looking at the whole area of hazardous medical waste, which is a growing problem in a numbers of countries. We’ll be developing a new programme dealing with hazardous medical waste. Your prime minister Sheikh Hasina is also concern about it,’ the UNIDO chief said.

On the downward trend of funding, he said they would advocate internationally for funding though bilateral funding is decreasing. The UN is advocating the private sector across the world to come and invest in Bangladesh.

‘There are lots of international banks and companies which are looking for opportunities for green investment… it’s a growing area now internationally. We’re working together with public and private entities to give confidence so that a large volume of investment can be attracted,’ the UN body chief said.

Appreciating the remarkable progress of the country’s readymade garments and pharmaceutical industries, Kandeh said: ‘Bangladesh can be an example to other developing countries as it has proven its capacity in these sectors.’

He said there is no doubt that poverty cannot be eradicated without industrialisation.

‘I’ve visited some factories, it was really impressive to see what your country has done in expanding industrial production….some of your companies are very competitive globally and they are producing international standard products and exporting to major international markets,’ he said.

China to help develop infrastructure, agriculture, education, health sectors : Xi Jinping

Chinese Vice President Xi Jinping calls on President Zillur Rahman at Bangabhaban in the city yesterday.Photo: PIDUnb, Dhaka

China is ready to extend all cooperation and assistance to Bangladesh, particularly for development of the infrastructure, agriculture, education and health sectors, Chinese Vice President Xi Jinping said recently.

“The two countries (Bangladesh and China) are ready to move ahead with concerted efforts,” Jinping said during a meeting with President Zillur Rahman at Bangabhaban.

He said although China is a developing country, it is always willing to provide all kinds of cooperation and assistance to Bangladesh.

Expressing gratitude for the Bangladesh's support for 'One China Policy' Jinping said both the countries as neighbours attach importance to strengthening of bilateral economic and commercial ties.

“We want to gradually enhance our cooperation in trade and commerce and cultural sectors,” he said. Xi described the government's Vision-2021 as a 'Master Plan' for the country and hoped Bangladesh would be turned into a middle income country by 2021. “China is happy over the government's Vision-2021.”

He said China is currently emphasising three sectors  –  education, science and technology and human resources to keep pace with its trend of development. Xi invited Zillur to visit China at his convenience in the near future.

Welcoming the Chinese delegation to Bangabhaban, Zillur said since Bangladesh's independence, China as a friendly country has been giving assistance for development of infrastructures, including construction of bridges across the country.

Saying that China would emerge as a giant economic power within a short period of time, Zillur said existing cooperation, particularly in economic, social and cultural fields, would be further deepened between the two countries.

He emphasised establishing connectivity between the two countries to reduce the existing trade gap.

The President conveyed his greetings to the Chinese President through Vice President Xi.

Japan keeps mum on Padma Bridge loan: Government in a fix 

The Japanese government is yet to confirm its loan for the Padma Bridge construction project despite Bangladesh government's repeated requests to the large bilateral donor for bankrolling the massive scheme, officials said.

"We have so far sent several requests to Japanese funding agency JICA (Japan International Cooperation Agency) for confirming their investment in the Padma Bridge project. But the donor agency is yet to give any reply," a senior finance ministry official said.

He said: "Last time in mid-April, we have pleaded JICA for confirming its assistance. But we have not got any response till date."

Non-confirmation of funds by Japan, the country's largest bilateral donor, has baffled the government as it is all set to construct the Padma Bridge, which will require a huge 2.40 billion dollar in investment, the official said.

Bangladesh government has undertaken the project at a cost of  2.40 billion dollar for building the 6.15 kilometre road-cum-railway bridge over the river Padma at Mawa-Janjira point.

It has requested different donors to finance the project as the government has shortage of funds for building the proposed expensive bridge, largest in the country.

The World Bank, Asian Development Bank (ADB), Islamic Development Bank (IDB) and UAE's Abu Dhabi Fund have already pledged to bankroll nearly 1.90 billion dollar funds for constructing the bridge.

Out of the funds, the World Bank will provide 1.20 billion dollar, ADB 550 million dollar, IDB 130 million dollar and the Abu Dhabi Fund of the UAE government 30 million dollar.

The finance ministry official said during the project preparation stage the Japanese government had assured Bangladesh of bankrolling the project. "But later the donor started to go slow on their funding," he added.

An economic relations division (ERD) official said: "We have sent requests to JICA in the middle of April for confirming their loan for the Padma Bridge project. But we have not got any reply till date."

JICA in 2005 conducted a feasibility study on the proposed Padma Bridge project and handed it over to the government. Later, the government in 2008 has appointed a New Zealand-based consulting firm for conducing the feasibility study again.

"As the government has not taken into account the JICA's study, it has become unhappy. I think it is one of the reasons behind Japan's go-slow policy concerning the Padma Bridge project," the ERD official added.

The government has already invited bids from international firms to construct the 6.15km Padma multipurpose bridge.

The ERD official said the government was expecting at least 300 million dollar aid from the Japanese government. "But it is not responding to us now when we request it for confirming the loan."

In the middle of April, we requested JICA to bankroll three projects including Padma Bridge, and Khulna city water supply and SME financing schemes under the next loan package.

A JICA official requesting anonymity said that they had been scrutinising the government's request. "As the Japanese financial year has just started in April, it requires some time to confirm the aid," it added.

"We are hopeful of continuing support to the Bangladesh government," the official said.

A joint donor-government survey showed that Padma Bridge will boost the country's gross domestic product by 1.2 per cent, revive the prospects of Mongla Port and cut poverty in the poorer south-western region.

Trading with Australia : Envoy speaks on the potential of growing trade between the countries

Bangladesh's exports to Australia have shot up on the back of duty-free and quota-free (DFQF) benefits awarded by Canberra.

The shipments soared 176 percent to 119 million Australian dollar or 98 million usdollar in 2008-09 from 43 million Australian dollar (35 million usdollar) a year ago  –  the highest since Bangladesh had got the DFQF facility in 2003.

Another high in the last six years was at 51 million Australian dollar in 2004-05. [1 AUD=0.830222 USD]

The global financial crisis that rattled Bangladesh's two major export destinations – Europe and the US  –  has pushed the exporters into diversifying markets. Clothing items led the latest surge in exports to Australia.

“It's good to see that's finally been taken up,” says Justin Lee, Australian high commissioner to Bangladesh.

Even after getting the DFQF facility, Bangladesh's exporters showed a little interest in Australia whose total imports stood at 191 billion US dollar in 2008.

There was a lack of knowledge among Bangladeshi exporters about the potential in Australia. Also, the Australian buyers had a tendency to shop from other countries in Asia.

These destinations such as China are becoming expensive, leading the buyers, including those in Australia, to explore cheap sources.

The Australian envoy says Bangladesh is becoming a strong competitor in the region.

“That's why the Australian buyers are now coming here,” says Lee.

To Lee, it is a sign of rising awareness among the businesses of both the countries.

“So it really means that at the moment there is a good opportunity to increase bilateral trade and good opportunity for Bangladesh to increase exports.”

However, according to the high commissioner, there is still something to do for building confidence among the Australian buyers who do not have much knowledge about Bangladesh's supply.

Lee says the key factor that raises the doubt is power and energy crisis as it eats into the whole manufacturing capacity of the country.

“The Australian buyers coming to Dhaka have asked whether the electricity and energy shortages in Bangladesh might affect manufacturing and the ability of Bangladesh producers to fulfil orders from overseas and expand into new markets,” he says.

The diplomat is aware of Bangladesh's export performance in the leading markets.

But the question the buyers in the new markets have is whether Bangladesh will be able to keep expanding production into new markets given the infrastructure constraints, Lee says.

“So I really think that the ball is in Bangladesh's court in some way to look at how they can further increase manufacturing capacity here.”

He says Bangladesh will be able to increase manufacturing capacity by addressing the energy and electricity crisis, which in turn will boost confidence among the buyers and help grow bilateral trade.

Data provided by the Australian high commission shows the bilateral trade rose to 495 million Australian dollar in 2008-09 from 281 million Australian dollar in 2007-08, with Australia enjoying a trade surplus amid continuous rise in its exports.

Australia's major exports include vegetables, wheat, milk and cream as well as industrial raw materials such as cotton.

“You don't import laptop computers, cars and consumers goods. We sent to Bangladesh products that are good for Bangladesh economy.”

However high tariffs and taxes on Australian items such as milk and dairy, fresh fruits and LPG (liquefied petroleum gas) continue to be disincentive.

Lee says products like milk are not luxurious goods rather essentials to promote nutrition and good health. Tariffs can also be reduced on fresh foods, he says.

The high duty and taxes have made the market of the milk products limited to the wealthy consumers, the envoy says.

Also non-tariff barriers act as deterrent to import of food items from Australia due to time consuming certificate and clearing procedures.

“We would argue that we could get an increase in trade if some of those tariffs and non-tariff barriers are lowered or reconsidered,” says Lee. These measures will facilitate further rise in the two-way trade.

One of the critical issues to strengthen bilateral trade is how Bangladesh can increase its exports to Australia.

He says the DFQF facility will be helpful in accelerating exports if awareness raising campaign and promotion continue.

“But I think if Bangladesh can increase the capacity here and make sure that they fulfil the orders then people will be coming to Bangladesh.”

Lee also points to the need for diversification of the export products.

Presently, garments account for three-fourth of export earnings at 15.56 billion US dollar.

Some other sectors such as pharmaceuticals and shipbuilding are emerging with promises to fetch more income from exports.

Lee says one of the ways to increase bilateral trade could be to form joint ventures with Australian companies, which will facilitate marketing back in Australia.

Now investment of Australian companies is low with bulk of the investment being made in energy and farm sectors.

“I think there could be efforts to facilitate more investment that would help trade as well.”

The Australian diplomat says the Bangladeshi businessmen should look at what other countries are selling to Australia so they can think of exporting those to Australia.

According to Lee, Bangladesh is becoming more competitive compared to other countries in the region.

And if Bangladesh diversifies its manufacturing base, it will yield positive results.

“Starting point is getting infrastructure right so that it can support broad manufacturing. Then try to diversify the manufacturing base,” says Lee.

“Because basically whatever Bangladesh produces cheaply, reliably and cost effectively, people from other countries including Australia are going to purchase.”

OECD pledges to cut deficits, protect growth

OECD countries committed recently to cutting their deficits without hurting growth, in a closing statement at their annual ministers’ meeting.

‘It is important to develop credible and transparent medium-term fiscal consolidation plans,’ said the ministers of the 35-nation Organisation for Economic Cooperation and Development.

‘We will implement them in ways that do not jeopardise growth.’In its recently twice-yearly world economic report , the OECD said the world is recovering robustly from the global downturn but warned that threats remain from eurozone debt and a risk of overheating in emerging economies.

It upgraded the global economic growth forecast for this year to at least 4.6 per cent after a shrinkage of 0.9 per cent in 2009.

The report insisted that OECD governments should take ‘urgent’ action to curb spiralling debt levels after applying costly stimulus measures to help their countries out of recession following the 2008 financial crisis.

‘The fiscal positions of most OECD countries have deteriorated significantly as a result of the crisis and face growing pressure from ageing populations, and they need to be brought to a more sustainable path,’ the OECD said Friday.

‘In carrying out fiscal consolidation, we will improve structural fiscal balances, and stabilise and lower the burden of public debt in the medium and long term,’ it added.

The OECD also vowed to tackle unemployment, which it forecasts will remain stubbornly high this year and next at more than 10 per cent in the eurozone and more than eight per cent across the OECD’s members.

‘Unemployment rates remain high in most OECD countries,’ it said. ‘We will develop comprehensive, inclusive, innovative employment and social policies in order to tackle this jobs crisis and promote recovery and growth for all.’

The OECD, a club of developed countries, now has 35 members after welcoming Israel, Slovenia, Estonia and Chile recently.

South Korea, China, Japan eye free trade bloc

South Korea, China and Japan recently called for free-trade talks aimed at eventually creating a single economic bloc to be speeded up, as their leaders met for a three-way summit.

The calls came as South Korean president Lee Myung-Bak hosted the two-day summit, joined by Chinese premier Wen Jiabao and Japanese prime minister Yukio Hatoyama, to discuss regional security and economic issues.

South Korea has for years been in separate free-trade talks with China and Japan, but with little progress.

‘A South Korea-Japan FTA (free trade agreement) would contribute to developing the bilateral relations on a mid- and long-term basis,’ Lee told Hatoyama during their bilateral summit, according to Lee’s spokesman.

Lee proposed to Hatoyama that the two countries should ‘speed up’ their preliminary talks  –  in place since 2004  –  before holding official talks on negotiating a free trade pact.

‘The signing of an FTA is important for Japan and South Korea to cement their relationship in the next 100 years,’ Hatoyama said, adding his government would make active efforts towards it.

China’s premier Wen on recently also called for talks on a bilateral free-trade agreement with South Korea as both sides wrapped up a three-year joint feasibility study on the project.

‘The two countries should start official talks on their free-trade agreement in the future,’ Wen was quoted as saying by Yonhap news agency at a meeting with South Korean business leaders in Seoul.

South Korea and China recently signed a memorandum of understanding, agreeing to hold preliminary talks on sensitive sectors such as agriculture before starting full-fledged negotiations on a free-trade pact.

Last weekend, the trade ministers of South Korea, China and Japan confirmed they would complete a feasibility study within two years on creating a single free trade bloc grouping their three countries.

China has emerged as South Korea’s largest trading partner, absorbing some 24 per cent of its total exports in 2009.

South Korea has been actively pushing for free-trade agreements worldwide to bolster its export-dominated economy.

It already has such agreements with Chile, Singapore, India, the European Free Trade Association and the Association of Southeast Asian Nations.

A free-trade pact was signed with the European Union in October 2009 and awaits ratification. A deal signed with the United States in 2007 is also awaiting ratification.

World trade growth slows

Global trade volumes in the first three months of this year were 5.3 percent higher than in the previous quarter, representing slightly slower growth than in recent months but still a healthy rebound from the crisis, data from the Dutch CPB institute showed on Monday.

The CPB, whose data are used by the European Commission and World Bank, said world trade in the three months ended February had grown by 5.8 percent over the previous three months and grown 6.0 percent in the last quarter of 2009.

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