Increasing the country's tax-to-GDP ratio is one of the main priorities of Bangladesh Awami League's (AL) election manifesto, and to achieve that, the Bangladesh Institute of Development Studies (BIDS) suggested on Sunday, setting a target to increase it by at least half a percentage point every year.
“To overcome the internal revenue collection challenge, Bangladesh needs to attract more foreign direct investment (FDI) and think creatively about the geo-economics of FDI flows,” said Binayak Sen, director general of BIDS, during his keynote presentation titled “Overview of Economic and Social Trends: Challenges for Smart Bangladesh.”
He was presenting at the seminar “Unpacking the Economic Manifesto of the Awami League: Trends and Challenges for Tomorrow’s Bangladesh” on Sunday.
He spoke on the key challenges of macroeconomic stability outlined in Awami League’s manifesto, including inflation, exchange rate volatility, foreign exchange reserves, international trade, current account balance, and the fragile financial sector.
“Structural Transformation is happening and we are becoming a manufacturing nation. There is a good trend in public and private investments, but still inadequate to achieve upper middle income status,” he further stated.
Dr Sen also spoke of nine priorities, among which raising the tax to GDP ratio was imperative.
“More fiscal effort is needed away from import tariffs and trade taxes to direct taxes (income tax, wealth tax, and inheritance tax). We need a 15-17% tax-GDP ratio to be consistent with the middle income status. We have to increase the latter at half a percentage point every year.
“Then the total investment-GDP ratio would be increased from 32% to 34%. This is clearly inadequate to the need for growth acceleration and reaching upper middle income status,” he said.
"To address the investment gap, we need to attract more FDI (also foster technological progress). We need to evaluate the performance of SEZs/EPZs in terms of technological spillover effects, and think creatively about geo-economics of FDI flows," the BIDS DG commented.
He also stated that educational quality and equality (role of early education; importance of socio-emotional skills; expanded TVET; second-chance schooling; creating centers of excellence at tertiary level were key to further development.
"We have to reduce the 'inequality of opportunities' which is still widely varying by income classes, ethnicities, and geographical regions (Haor areas, for example.)"
Chief guest, Planning Minister Abdus Salam said: “To implement the challenge of the manifesto, macroeconomic stability must be maintained. Inflation control is one of the main challenges. For this, tools such as money supply and monetary policy are being used, the benefits of which we have already started to see.”
Badrun Nessa Ahmed, research fellow, BIDS, said that although unemployment rate was reducing, youth unemployment still stood at 8%, way over the national rate.
Regarding the high unemployment rate among the educated population, she also said: “BIDS last year completed a follow-up tracer study among National University graduates. Total unemployment rate among the graduates turned out to be 28.24%, of which 19.96% were male and 34.31% were female graduates. Wage employment rate is 42.29%. Only 16.2% of graduates are currently engaged in self-employment and 13.22% are studying with some part-time work.”