Despite a huge increase in the proposed national budget for the next fiscal year, private investment must be raised if Bangladesh is to continue on its current growth trajectory, the Metropolitan Chamber of Commerce and Industry (MCCI) said on Friday.
The national trade body made the call a day after Finance Minister AMA Muhith placed a total budget before parliament of Tk464,573 - over 16% higher than the initial budget for the outgoing fiscal year.
In its reaction statement, MCCI applauded Muhith for considering national development goals and infrastructure development, but said more needed to be done to uphold the country’s graduation to developing country status.
“The chamber thinks Bangladesh’s economy is progressing well, but below its true potential,” the statement said.
“Inadequate infrastructure and shortage of power and energy are now major impediments to growth. Also, shortfall in revenue collection and weak ADP implementation are currently major worries for the economy.
“There is no alternative to raising the level of private investment including foreign direct investment if Bangladesh is to confirm the status of developing country by 2021.”
In its statement, MCCI called for urgent policy reforms, a simplification of the taxation system, and business friendly policies including further incentives and a blanket reduction in corporate tax.
It also queried the lack of support given to key government economic policy in the budget.
“Though the country has officially adopted an ‘employment-led growth’ model in national planning, it is difficult to see a reflection of this in the proposed budget,” the chamber said.
“The recent BBS report showing shrinking number of new jobs despite the high GDP growth reported is a major concern which should have been addressed in the budget.”
MCCI said it appreciated the growth target of 7.8%, but sounded a warning on inflation.
“The growth rate will rise further as the country has started showing encouraging signs,” the statement read. “Higher GDP growth is necessary for achieving the status of developing country by 2021, however, special attention will need to be given to containing inflation.”
Tax revenue challenge
Despite the increased number of taxpayers, MCCI said attaining the increased revenue target for the National Board of Revenue for FY19 will continue to be a “major challenge”.
This has been proposed at Tk296,201 crore - 32% higher than in the revised budget of Tk225,000 crore for FY2017-18.
The MCCI nevertheless expressed its disappointment with the government’s failure to reduce corporate tax across the board, saying those rates are “the highest in the region”.
It also criticized the lack of reforms to correct the deficits of state-owned enterprises, or the non-performing loans of the state-owned commercial banks.
The budget proposes to continue financing deficits in state-owned enterprises and capital shortfalls in state banks through budget transfers, which MCCI feels is an “unjustified burden on the taxpayers”.
“Also, since ride-sharing services like Uber and Pathao address the transport needs of the general public, 5% VAT should not be imposed on these services,” it added.
The chamber said the allocation of Tk173,000 crore for the annual development program (ADP) for FY19 will help to fulfil the country’s development goals. However, it urged the government to take necessary measures to ensure the “efficient and effective spending” of the ADP funds.
It also lauded the proposed allocation for human resources - education, health and family welfare - in the upcoming ADP.
On communication infrastructure - the second largest allocation - MCCI called for the proper utilization of resources and their timely completion.
